Katie's Cafe Is Considering the Addition of a New Refrigeration

question 247

Multiple Choice

Katie's Cafe is considering the addition of a new refrigeration system that will cut annual food costs by $15,001. The system will cost $36,000 to purchase and install. This system is expected to have a
3-year life and will be depreciated to zero using straight-line depreciation. What is the annual net
Income for this project if the tax rate is 34%?

• A) $880
• B) $1,020
• C) $1,240
• D) $1,750
• E) $1,980

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Definitions:

GAAP Constraints

Limitations or guidelines in Generally Accepted Accounting Principles that direct the application of accounting procedures.

Timeliness

The provision of information to users quickly enough for it to influence their decisions, a crucial aspect in financial reporting.

Accounting Assumptions

Foundations that underlie the financial statements, such as the assumption that a company will continue to operate (going concern assumption).

Conventions

Established practices or agreed-upon methods in accounting that guide the preparation and presentation of financial statements.